Good News for Natural Gas

High inventories, a mild hurricane season and off-peak demand have spurred the recent drop in U.S. natural gas costs, but other factors could keep prices modest during the next two to three, says Michelle Michot Foss, an energy economist at the Center for Energy Economics at the University of Texas. A warmer North American winter, in particular, would minimize the draw on already high natural gas inventories. "If we have a mild winter, we'd be in the same boat that we have been in this year," she said. "We'd be heading into the summer season with additional gas being produced in our fields, going into storage and accumulating rapid inventory build-up." She says other factors, such as expanded offshore drilling and breakthroughs in accessing natural gas from more challenging reservoirs, also could push down prices.